Kicking the Fiscal Can Again!

If you can picture President Obama holding the football and Speaker Boehner preparing to kick it, you have a very clear picture of why Republicans are reluctant to agree to any revenue increases without specific, immediate and irrevocable spending cuts delineated by the president.

Republican presidents of the past have fallen for this “promise” to cut spending including President Reagan and most notably President Bush I (of the “no new taxes declaration).

The tax rates on the top earners in the U.S. will likely go up as part of a deal, but more likely to 36% or 37% rather than to the 39.6% level of the Clinton era and there will be changes and limitations made to deductions and credits in the tax code for all wage earners.

The payroll should and likely will return to the 6.2% and this is only a first step in making some structural changes to the social security program (without changing the fundamental benefit) to insure long term solvency. Those reforms could include raising the wages subject to payroll tax from the current $106,000 to $250,000, along with a “means testing” limitation of social security payments based on levels of post retirement income excluding social security. There could also be a gradual increase of the eligibility age from the current 62 and 65 for partial and full social security benefits to 63 and 67.

These changes will create a real increase in revenue, but that is simply a first step.

We also need significant, immediate, across the board spending cuts and a change in the way money is spent in the future (holding spending to the levels of revenue) in order to right the fiscal ship of state

The money that will be saved in ht coming years by the president’s winding down of the wars in Iraq and Afghanistan (which will not be spent anyway and is no longer part of the budget baseline numbers) should not be included as part of the “spending cuts”.

There must be cuts in the Department of Defense and a fundamental restructuring of the global defense mission and machine of the United States as well as cuts and discipline in domestic spending.

Of course there is always the option that the Democrats dig in their hills about real spending cuts and the Republicans dig in their heels about real revenue increases and we continue to stagger along as a deficit spending former super power on the way to austerity.